Article

IoD responds to Government’s proposals on insolvent businesses

26 Aug 2018

Responding to the Government’s proposals to tighten corporate governance requirements around insolvencies, Roger Barker, Head of Corporate Governance at the Institute of Directors, said:

“It is clearly unacceptable for board members to evade their legal duties as directors by simply dissolving a company and carrying on the same business activity with a newly formed corporate entity. Consequently we support the government's proposals to bring former board members of dissolved companies within the legal mechanisms of accountability that apply to serving directors. Government proposals concerning the transparency of the dividend pay-out process are also to be welcomed.

“We have argued for some years that the UK would benefit from insolvency mechanisms that give struggling but inherently viable companies more time to work through their problems before disappearing into administration or liquidation. A fresh government approach in this area is therefore warranted, particularly in the wake of recent high profile corporate collapses.

“Perhaps the most interesting aspects of today's announcement relate to the training and evaluation of boards of directors. The IoD has been a strong advocate of policy measures that would give greater prominence to both of these issues. We believe that improved director training and board evaluation processes can, if implemented in a meaningful way, make a big difference to the effectiveness of board decision-making and oversight. We are therefore delighted to offer our support to government initiatives which aim to improve standards and take-up in both of these areas.”